3 reasons why it’s ok for MBAs to seek jobs in tech.

Chicken Little: the end is near.Last week, the WSJ raised alarm bells by reporting that 5 of the top 10 desired employers of MBAs this year are consumer technology companies. Long-standing service firms like McKinsey, Bain, BCG, Goldman Sachs, and Blackstone were joined by likes of Google, Apple, Facebook, Amazon, and IDEO.

So many MBAs seeking jobs in tech has spooked those of us who increasingly fear a second dot-com bubble. Many cite the Harvard MBA index, which famously tells investors to short any “market sensitive”sector with more than 30% of the Harvard Business School class entering it. In 1999, that sector was tech. Others — like Bob Lutz, former Vice Chairman of General Motors — believe that MBAs with their “balance sheet driven management policies” corrupt organizations that productize technology. (I wonder what visionary GM CEO Alfred Sloan, whose name graces the MIT Sloan School of Management, would think of Bob’s new stump speech. But, I digress…)

So, should we really be concerned? MBAs are easy targets and, being one myself, I am a bit defensive of them. That said, I do believe the case for MBAs in consumer technology is fundamentally different than it was a decade ago. At the very least, it’s different for the types of tech companies MBAs are pursuing today, like those listed above.

Here are 3 reasons why MBAs seeking jobs in technology may not be the end of the world.

#1: Technology is one of the last remaining hopes of the U.S. economy.

Before the late 1990’s, the U.S. economy was a lot less dependent on consumer technology as a key driver. From 1998-2008, however, the real GDP of the “information” sector (which contains tech) grew at 3.7% annually, a rate second only to that of “professional and business services.” The Bureau of Labor expects it to be the fastest growing sector over the next 10 years:

Gross domestic output by major industry

Despite its robustness, tech’s share of the U.S. economy remains relatively small (less than 5%), so there’s still plenty of room for growth.

From a public markets perspective, technology clearly outpaces other sectors in terms of both revenue growth and profitability today:

Technology sector outperforms others.

Source: eTrade.com data.

When it comes to number of IPOs, information technology is still one of the top 5 most active sectors. From 2006 to 2011 (year-to-date), aside from the financial sector, technology had the highest number of IPOs with over $50M of proceeds, according to CapitalIQ:

  • Financials: 287
  • Information technology: 112
  • Energy: 84
  • Healthcare: 79
  • Industrials: 64

The tech sector is alive and well and has become the backbone of an otherwise lackluster U.S. economy. It’s a good bet for an MBA to enter this sector from a career perspective.

#2: Technology has become a real business with known paths to monetization.

It is easy to forget the scale of the top technology companies today, relative to where they were in 2000. When we look at revenues in 2000 vs. 2010, we see several already established companies that grew 2-3x:

  • Microsoft: $23B to $62B
  • Oracle: $10.2B to $26.8B

But, we also see a host of other companies who started prior to the dot-com bubble, who have grown even more dramatically, by 6-30x:

  • Apple: $7.9B to $65B
  • Amazon: $1.6B to $34B
  • Yahoo!: $1.1B to $6.3B
  • eBay: $0.4B to $9.1B

Finally, there are a host of other companies who had de minimus revenue in 2000, but today are tech leaders with great scale, including Google ($29B in 2010 revenues), Netflix ($2.2B), and Salesforce ($1.7B).

In 2000, there were relatively fewer examples that proved technology (especially consumer tech) to be a sustainable, long-term career choice. Why was that? Because making money on the internet was still a difficult thing to understand.

Today, we all know how to make money in consumer internet: (1) sell ads/leads, (2) sell a subscription service/data feed, or (3) sell an actual product. It’s no longer a question if a sustainable business can be built with these revenue models. Now, it’s a question of product/market fit, and good old-fashioned execution.

#3: MBAs can be useful at big tech companies, unlike (perhaps) early-stage startups.

What’s the difference between working for GE and working for Apple? GE is a $587B enterprise value public company with $149B of revenue, $13B of net income, and $82B of cash. Apple is a $336B enterprise value public company with $100B of revenue, $24B of net income, and $76B of cash.

By any measure of objectivity, a job at Apple is just as “low risk” as the traditional MBA job at GE. That said, most would agree that Apple has better growth prospects than GE and, for most of us, is probably a more exciting place to work. Net-net, working at Apple is a way better decision than working at GE, just on the basis of risk/reward.

Moreover, big technology companies have lots of problems that MBAs are well-suited to solve. The same issues around business development, strategy, marketing, and M&A that MBAs tackle at companies like GE are prevalent at technology giants today. Note that this wasn’t necessarily true in 2000, when most tech companies were focused on engineering/product and figuring out how to make money.

Finally, let’s not forget that the CEO/COO roles of eBay, Facebook, Palm, Yelp, Zynga, and many other tech giants are now or were at one time held by MBAs. The proof is in the proverbial pudding here. Whether it’s leadership skills or contextual knowledge from studying hundreds of business cases, the MBA clearly imparts something of value that benefits technology companies.

Signs of Bubble 2.0 may be all around us, but MBAs seeking employment at big consumer tech companies isn’t one of them.

Technology has become an attractive sector for MBAs to enter. I wouldn’t recommend the average MBA join a pre-product startup, but a multibillion dollar tech company has lots of roles for an MBA to fill. The fact that MBAs are being drawn to these companies has nothing to do with a bubble. It’s an endorsement that the tech sector is the best place in the U.S. economy to build a career today.

Disagree? Feel free to leave a comment below. And, thanks to my MBA classmate Charles Huang for his suggestions!

This entry was posted in Advice, MBA, Technology and tagged . Bookmark the permalink.

7 Responses to 3 reasons why it’s ok for MBAs to seek jobs in tech.

  1. Suresh Gopalan (ReSurfX) says:

    Very nice post, Alex! Convincing case that MBAs have many roles to ‘fill’ in multibillion dollar companies, and that per se does not seem to be an indicator of ‘Bubble 2.0’ originating from that sector. Would it not be more satisfying and of longer term value for more (than now) MBAs to create roles and value in tech startups? May not be for the fainthearted – but more people choosing the latter path should ‘create’ newer tech giants in addition to ‘fill’ the roles in the former companies preserve them. I also wonder if the physical placement of ‘Finance’ and ‘Tech’ in revenue/margin graph would have been reversed few years ago.

    • Alex Taussig says:

      Thanks for your comment. I generally think that it is wiser for most people to go train at a larger company with several layers of management, learn some core skills, discover a problem they’re passionate about solving, and then be a founder. For some entrepreneurs, this isn’t the path, but for a majority (and therefore most MBAs) I would say it is. Hence, most MBAs would be better served at a larger company right out of school if they ultimately want to do the startup thing.

  2. David H. says:

    What about MBAs founding tech companies? There have been a lot of successful entrepreneurs to come out of HBS (and other business schools). Is this still a viable path?

    • Alex Taussig says:

      There are certainly great examples of MBAs founding tech companies. Here are a few examples, just from HBS: athenahealth, Bloomberg, Gilt Groupe, Hunch, Intuit, Kiva Systems, The Ladders, Staples, Yelp, Zynga. In my year at HBS, we had 10+ companies get founded, and most of them raised venture capital (CloudFlare, Rent the Runway, ThredUp, Viglink, and others).

      Starting a company out of business schools is definitely a viable path, but it’s still relatively uncommon when you consider that HBS graduates 900 students a year! And, that’s probably ok. There are many other paths in technology for MBAs.

  3. Pingback: The Job Sector Hot as Palm Springs in July | Mint Resumes

  4. Jay says:

    Great post! At ND, a surprising number of students are originally from tech, but most are looking to transition into consulting and investments. I’m curious as to why there’s such a talent drain from promising tech industry contributors to these fields. Maybe it’s the perception that the work is harder and the rewards greater, but the risk is less compared to startups?

    • Alex Taussig says:

      A few possible reasons: first, these other fields recruit and train better. They are machines that can afford to compete for MBAs on campus and to train them up when they start right after school. Second, they are also perceived as “lower risk” by many people. Third, most MBAs have no idea what they want to do with their careers, and these jobs allow them to delay the inevitable choice.

      Finally, maybe some people like consulting, banking, and hedge. I’d guess that maybe 20% of those people actually fall into this latter category, however.

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